UNDERSTANDING THE IMPORTANCE OF SECOND INJURY CLAIMS:
THE INSURER’S PERSPECTIVE
RYAN L. SCHAIBERGER
The Massachusetts Second Injury Fund (“SIF”) operates as a form of subrogation
for insurers since successful claims can significantly reduce costs on some of the highest
exposure workers’ compensation claims. Under § 37, insurers may recover up to 75% of
§§ 31, 32, 33, 34A, 36A, and 30 payments made after the 104th week of disability.1 The
SIF also covers § 37A which relates to disabled war veterans and can result in
reimbursement of 50% of payments made within the first 104 weeks of disability, and
100% thereafter.2 For recovery to be obtained from the SIF, the insurer, self-insurer, selfinsurance group, or municipality seeking recovery must not have opted out of payment of
assessments pursuant to the procedures described in § 65(4)3.
Elements to SIF Recovery
On “New Act” claims with dates of injury after December 23, 1991, an insurer
must be capable of filing a claim within 2 years of the date of the payment upon which
reimbursement is being requested that satisfies six (6) elements.4 To obtain recovery the
insurer must be able to show:
1) the existence of a prior physical impairment;
2) actual employer knowledge of the prior physical impairment;
3) the prior impairment was a likely hindrance or obstacle to employment;
4) the employee had an accepted subsequent industrial personal injury (“second
injury”);
5) the prior impairment resulted in the second injury being substantially greater
than the disability that would have resulted absent the prior impairment; and
6) the employee was paid benefits that represent permanent and total disability
benefits under § 34A.5
A claim for SIF recovery requires that each of these elements be demonstrated. If
even one of these elements is not satisfied then the claim will fail.
On “Mid Act” claims with dates of injury between November 1, 1986 and
December 22, 1991, SIF recovery is significantly expanded since the insurer may also
recover up to 75% of §§ 34 and 35 benefits in addition to the benefits that are
reimbursable under the New Act.6 The elements to a claim for recovery under the Mid
1
M.G.L. c. 152 § 37
M.G.L. c. 152 § 37A
3
M.G.L. c. 152 § 65(4)
4
M.G.L. c. 152 § 37 at 6.
5
M.G.L. c. 152 § 37
6
M.G.L. c 152 § 37, as amended by St. 1985, c. 572, §§ 48 and 49, and expressly made substantive by St.
1985, c. 572, § 65 , and St. 1986, c. 662, § 32
2
Act are essentially the same as with the New Act except that employer knowledge can be
established constructively through the presentation of medical records relating to the
prior physical impairment.7 Also, pursuant to the Case of Alves there is no statute of
limitations on the filing of Mid Act claims for SIF recovery.8 Therefore, claims need not
be filed within 2 years of the date of the payment upon which reimbursement is being
requested.
On “Old Act” claims with dates of injury prior to October 31, 1986, the insurer
may be reimbursed up to 50% of all workers’ compensation benefits paid after the 104th
week of disability.9 Constructive knowledge that the employer was aware of the
employee’s prior physical impairment is sufficient.
1. Prior Physical Impairment
The prior physical impairment in a claim for SIF recovery must be due to a
previous accident, disease or congenital condition.10 The prior physical impairment does
not need to arise out of a work-related injury. An insurer can satisfy this element by
providing medical records relating to an employee’s preexisting impairment. The records
should describe any major events or injuries and include information about surgeries,
treatment and permanent impairment. The records should also all be dated prior to the
second injury. Records after the second injury that diagnose an employee with a
degenerative condition are typically not acceptable in the absence of additional evidence
showing significant treatment before the second industrial injury. The strongest claims
will support that an employee treated for the prior physical impairment up to the time of
the second injury. Significant gaps in treatment may result in deductions to any SIF
recovery.
Obtaining information relating to the employee’s treatment before the second
injury is often an insurer’s biggest obstacle to the prior physical impairment element.
Medical facilities or physicians can be reluctant to release information prior to the second
injury even with a medical authorization. They have argued that these records are
unrelated to the industrial injury and therefore should not be disclosed. Insurers should
maintain that the complete medical records are needed in order to determine the existence
of prior non-work-related injuries that may support a § 1(7A) defense to the underlying
claim and are therefore discoverable. In order to identify potential SIF recoveries, and
have claims prepared to file for maximum recovery within the statute of limitations, it is
essential to obtain the injured employee’s complete medical records and history early in
the claim process.
In disabled veterans claims under § 37A, the employee’s prior impairment must
result from a military related disability which is certified by the United States Veterans
7
M.G.L. c. 152 § 37, as amended by St. 1985, c. 572, §§ 48 and 49, and expressly made substantive by St.
1985, c. 572, § 65, and St. 1986, c. 662, § 32
8
See Cosgrove v. Penacook Place, 15 Mass. Workers’ Comp. Rep. 401 (2001)
9
M.G.L. c. 152 § 37 as amended by St. 1973, c. 855 § 2
10
M.G.L. c. 152 § 37
Administration.11 Obtaining these records and reports can often be the biggest obstacle to
claims under § 37A.
2. Employer Knowledge
Employer knowledge of the employee’s prior physical impairment is undoubtedly
the most difficult element for insurers to establish on any claim for Second Injury Fund
recovery. § 37 requires that on New Act claims the employer had “actual knowledge” of
the employee’s prior physical impairment within 30 days of hire or retention.12 This is
often misunderstood as requiring the employer to know of the impairment within 30 days
of hire. However, the “or retention” language supports that an employee that has worked
for an employer beyond 30 days and subsequently disclosed a physical impairment, or
had a previous industrial injury and was able to return to work can also be sufficient as
long as the evidence suggests that it presented as a likely hindrance or obstacle to the
employee’s continued employment.
The best way to satisfy employer knowledge on a New Act claim is through
affidavits from the employer supporting that they did in fact have actual knowledge of the
employee’s prior physical impairment. The employer will need to attest that they did in
fact know of the employee’s preexisting physical impairment prior to the subsequent
industrial injury. The affidavit also needs to be completed by the owner, supervisor, HR
representative, or someone capable of sufficiently acting as a representative of the
employer with respect to the injured employee. Affidavits from co-workers or
individuals under the supervision of the injured employee are not sufficient to establish
this element. Any individual providing an affidavit should also be willing to appear and
testify should litigation be required on the claim.
Employer knowledge on New Act claims can also be shown through the
employer’s personnel records suggesting actual knowledge of the employee’s prior
physical impairment. This is best established with injury reports, medical records,
attendance records and any workers’ compensation filings that may be related to an
earlier injury. These records should also support where modifications to an employee’s
job duties have been necessary as a result of a prior physical impairment. It is
recommended that employers be advised to keep thorough records supporting any of their
employee’s complaints of pain, injuries, job modifications, missed time or leaves of
absence.
3. Likely Obstacle or Hindrance to Employment
The prior physical impairment must have likely been an obstacle or hindrance to
employment.13 Insurers should be encouraged to take note of the “likely” language in §
37 since it suggests that evidence showing actual accommodations to an employee’s job
duties is not necessary. However, if evidence of job modifications or accommodations
11
M.G.L. c. 152 § 37A
M.G.L.. c. 152 § 37
13
Id.
12
can be provided it will certainly strengthen the argument that this element has been
satisfied.
The preferred method of establishing this element is in an affidavit from the
employer. The same affidavit used to address the employer knowledge element should
also address whether the employer made any accommodations, or support that the
employer was aware that the prior impairment was a likely hindrance or obstacle to
employment. The employee’s personnel records can also be used if they reflect
modifications or accommodations.
Insurers may also rely on medical records relating to the employee’s prior
physical impairment in satisfying this element. Medical records suggesting permanent
impairment, significant treatment, and/or major medical procedures can be argued to be
highly suggestive of obstacles or hindrances to employment. Medical records supporting
extended treatment relating to a prior injury will support this element. These will often
times also indicate whether prior work-related injuries resulted in awards for permanent
loss of function or disfigurement benefits under § 36. This is particularly important on
Mid Act claims since affidavits are not necessary to support employer knowledge of the
employee’s prior physical impairment. Furthermore, since these dates of injury are at
least 21 years old, it is difficult to locate employers with recollection of specific
employees let alone modifications and/or accommodations.
Insurers should also be cognizant of whether a prior physical injury is classified
as creating a permanent impairment by the AMA’s Guides to the Evaluation of
Permanent Impairment. Specifically, prior spinal injuries may be classified as creating a
permanent physical impairment even if an individual is essentially asymptomatic at the
time of the second injury.14 This is because these medical issues can predispose an
individual to a significantly worse disability should they suffer another injury. While this
may not support a specific hindrance or obstacle it can help to support this argument if
there is a significant period where an employee did not actively treat for a prior physical
impairment before the second injury.
4. Second Injury
The “second injury” is the work-related injury that subsequently results in the
employee becoming permanently and totally disabled.15 The second injury needs to result
in payment of benefits pursuant to § 34A or a lump sum settlement payment that
reasonably represents exposure to permanent and total disability payments.16 This must
also be an accepted injury by the insurer. Injuries that are not accepted by the insurer are
not sufficient since the insurer is not accepting that an actual work-related “second
injury” did occur.
14
AMA Guides to the Evaluation of Permanent Impairment, 5 th Edition, Table 15-3 and 15-5
M.G.L. c. 152 § 37
16
See Cosgrove v. Penacook Place, 15 Mass. Workers’ Comp. Rep. 406 (2001)
15
In order to satisfy this element, the insurer should provide any reports of injury,
including the Form 101 First Report of Injury, any and all medical records relating to the
second injury with operative reports and evidence of any significant treatment. The
insurer should also provide any IME and/or impartial examination reports that would
support a permanent and total disability resulted. Information relating to any claim for
permanent and total disability benefits under § 34A or lump sum settlement should also
be provided in support of the severity of the second injury.
5. Substantially Greater Disability
Insurers must show that the disability following the second injury was
substantially greater as a result of the employee’s prior physical impairment.17 The Trust
Fund is very aggressive with this element and does require that the specific “substantially
greater” language is used in any report supporting this element. Records and reports that
are highly suggestive of this element but do not outright state it may result in this element
not being satisfied, or deductions being made to any settlement offers.
If “substantially greater” language is not used in any medical records or reports
then the preferred method of establishing this element is to obtain a medical records
review from a physician. The reviewing physician should be provided all of the
employee’s treatment records for the prior impairment and second injury in order to
opine whether the prior impairment did combine with the second injury to create a
substantially greater disability. Any physician performing a medical records review
should be asked to provide specific analysis regarding how the prior impairment
ultimately has impacted the second injury.
It is of note that the prior physical impairment and second injury do not need to be
to the same body part to support that a prior impairment did result in the disability from
the second injury being substantially greater. In some states this is a requirement,
however, in Massachusetts it simply needs to be shown that the prior impairment and the
second injury combined to result in a substantially greater disability. For instance, if an
individual’s prior impairment was to a lower extremity and the second injury was to the
back, it could be argued that gait issues arising from the knee impairment resulted in the
back injury being worse and thus makes the disability arising from the second injury
substantially greater.
In disabled veterans claims under §37A, the insurer is required to show that the
employee’s prior military-related disability aggravated or prolonged the employee’s
disability from the subsequent industrial injury.18 This standard is lower than the
substantially greater disability standard that is used in typical SIF claims under § 37. It is
also best established through medical opinions using this specific language.
6. Permanent and Total Disability Payments and Settlements
17
18
M.G.L. c. 152 § 37
M.G.L. c. 152 § 37A
The benefits that are reimbursable on New Act SIF claims pursuant to § 37
include §§ 31, 32, 33, 34A, 36A, and 30 payments made after the 104th week of
disability.19 Typically, the Second Injury Fund is most commonly applicable when
payments are made that reasonably represent permanent and total disability benefits
pursuant to § 34A. Some states Second Injury Funds allow for recovery of temporary or
partial disability benefits, but Massachusetts is very specific that only the abovementioned disability benefits will be reimbursed on New Act claims. On Mid Act claims
an employee must still be shown to be permanently and totally disabled as a result of the
second injury, but once this is established it may be possible to recover some of the
temporary total and temporary partial disability payments that were made after the 104th
week of disability.
The best way of demonstrating this element is by providing agreements to pay,
conference orders and hearing decisions that award permanent and total disability
benefits under § 34A. The insurer should also provide payment history records
supporting that the employee was actually paid any and all benefits they were due from
an industrial injury.
The difficulty with this element is when a claim settles prior to § 34A benefits
being awarded since the insurer has the burden of proving that any benefits payable
through a lump sum settlement reasonably represent § 34A benefits.20 In this situation it
is important that the settlement indicates that the employee’s work status is “permanently
and totally disabled” or “in dispute”. If any work capacity is suggested then the Trust
Fund will maintain that the employee was not in fact permanently and totally disabled,
the settlement does not represent permanent and total disability payments, and the SIF is
not applicable. Insurers can further support their argument that a settlement represents
permanent and total disability benefits with medical opinions that show that an employee
is permanently disabled and an award of § 34A was likely.
If an employee has filed a claim for permanent and total disability benefits prior
to settlement then this can also be highly suggestive that a settlement represents § 34A
benefits. It submits that the insurer was contemplating exposure to § 34A during
settlement negotiations. Language should also be placed in the narrative of any lump
sum settlement indicating that the settlement is being paid in lieu of permanent and total
disability benefits under § 34A.
The amount of the settlement can also support that it is representative of
permanent and total disability benefits if the gross amount of the settlement exceeds the
remaining exposure to temporary total and temporary partial disability payments.
However, the Trust Fund may insist on deductions of the remaining exposure to
temporary total and/or temporary partial disability benefits in any settlement offers.
The Trust Fund will also not reimburse attorney’s fees and expenses, or § 36
allocations in lump sum settlement agreements. Insurers should insist on specific
19
20
M.G.L. c. 152 § 37
See Cosgrove v. Penacook Place, 15 Mass. Workers’ Comp. Rep. 401 (2001)
amounts being allocated to § 36 in the settlement narrative or else the Trust Fund will
deduce this figure from the attorney’s fee. If the attorney’s fee represents less than 20%
of the settlement the Trust Fund will calculate § 36 based on this without considering
other factors why an attorney may charge a lesser fee. For instance if a case settles for
$100,000.00 and the attorney’s fee is $15,000.00, the Trust Fund will calculate that
$25,000.00 is allocated for § 36. ($15,000.00 x 5 = $75,000.00; $100,000.00 - $75,000.00
= $25,000.00). If the § 36 is not specifically allocated then it could result in lost recovery
from the SIF.
Insurers should also be weary of allocations made to non-reimbursable future
vocational or medical benefits that are increasingly used by employee’s counsels to
minimize Social Security offsets since the Trust Fund will also argue that these payments
are not reimbursable.
Insurers should avoid settling multiple dates of injury or multiple claims on one
lump sum settlement agreement. The Trust Fund will attempt to allocate a portion of
these settlements to the prior injury and argue that these funds are not reimbursable. In
these situations where multiple dates of injury are being closed out the insurers should
insist on specific amounts being designated to the prior injury dates in the narrative of the
agreement. However, the Trust Fund may maintain that low allocation figures would
suggest that the prior injury did not result in any prior impairment. This tends to be a
slippery slope which is why separate agreements is preferred.
§ 37 also allows for recovery of medical payments made after the 104th week of
disability.21 However, often times § 34A will not be established by this time and a claim
may not become ripe for SIF recovery until well after this time period. For instance if an
employee is awarded § 34A after receiving the full exposure of seven (7) years of §§ 34
and 35 benefits, an insurer can request reimbursement of medical payments made prior to
the award of § 34A as long as they are after the 104th week of disability and were made
within 2 years of the dates of the filing of the SIF request.22 Unfortunately this ultimately
means that if the claim for SIF recovery is not filed within four (4) years of the date of
injury then there may be medical payments that are not recoverable. This is why insurers
need to recognize potential claims for SIF recovery early in the claims process in order to
develop and file as soon as possible.
The Conciliation Process, Negotiations with the Workers’ Compensation Trust Fund
and Settlement
In order to obtain SIF recovery, insurers must submit a petition supporting each of
the elements to recovery.23 Two copies of the petition need to be submitted; one copy
goes to the Claims Department at the Department of Industrial Accidents, and the other
goes to the Deputy General Counsel of the Workers’ Compensation Trust Fund. The
petition needs to include a completed Form 122 Request for Section 37 Proceeding which
21
M.G.L. c. 152 § 37
See Rowley v. Allston Supply Company, Inc., Board No. 03223508, p. 2, citing M.G.L. c. 152 § 37
23
M.G.L. c. 152 § 37
22
indicates the insurer, claim information, and figures on what the insurer claims is
recoverable. The information pertaining to the insurer on the Form 122 also needs to
correspond with a W-9 Form that is on file with the Department of Industrial Accidents
in order for any payments to be issued.
Following the filing of the petition for SIF recovery the claim will be scheduled
for conciliation at the Boston Regional Office of the Department of Industrial Accidents.
The case will be assigned to an attorney with the Workers’ Compensation Trust Fund for
investigation and settlement discussions. The Trust Fund will indicate weaknesses that
they feel exist with the petition and/or request additional documentation supporting
elements to the claim. Typically, claims will be conciliated on a number of occasions
until a settlement agreement can ultimately be reached between the insurer and the Trust
Fund. After reaching a tentative agreement the Trust Fund attorney will seek final
authority to resolve the claim from the General Counsel.
After obtaining final settlement authority, the insurer will submit a Form 123
Agreement Under Section 37 that outlines the details of any settlement agreement. The
Form 123 will also include the initial recovery amount, whether the agreement is full and
final, or whether ongoing reimbursement of future payments will be made, and at what
percentage. The insurer needs to be very careful in the execution of this agreement to
specify the amount of the initial recovery and whether there will be entitlement to
ongoing reimbursement of future indemnity and/or medical benefits. Failure to properly
designate this information could result in lost recovery for the insurer.
Quarterly Reimbursements
As mentioned above, the insurer may settle SIF claims with ongoing
reimbursement of future medical and/or indemnity payments that are made after the
settlement agreement with the Trust Fund is executed.24 In order to obtain recovery of
future medical payments, the insurer can file for recovery on a quarterly basis. The
insurer needs to provide a copy of the fully executed Form 123, a full payment history
record supporting that each of the payments upon which reimbursement is being
requested was actually made, and medical reports supporting that any medical payments
were reasonable and related to the industrial injury. The insurer needs to be active in
filing for quarterly reimbursement since payments made more than two (2) years from the
date of the filing of the request are not recoverable.25
24
25
M.G.L. c. 152 § 37
Id.